Fairfax Media says gloomy conditions in the advertising market are still dragging on its revenues.Source: AAP

FAIRFAX Media has signalled it will chase even deeper cost cuts after reporting a fall in underlying first-half earnings and warning poor advertising spending will continue to drag on revenue.

Shares in the media group fell on Thursday as it revealed large drops in earnings for its metropolitan and regional businesses, raising analysts' concerns even as projected savings from its "Fairfax of the Future" restructuring program were increased.

Chief executive Greg Hywood said weak real estate and national advertising markets had affected interim earnings and the outlook remained negative for the second half of 2012/13.

"A sustained improvement in consumer sentiment is required in order to see an uplift in a number of our key advertising categories," Mr Hywood told analysts on Thursday.

However Mr Hywood said the turnaround of Fairfax was on track.

"We are where we expected to be at this stage of our transformation, if anything ahead of schedule," he said.

Fairfax reported net profit of $386.3 million for the six months to December 30, 2012.

The figure, up from $97.6 million in the previous first half, was boosted by proceeds from the sale of the Trade Me New Zealand online business and Fairfax's US agricultural publishing operation.

However underlying profit was down 38.8 per cent to $83 million.

Revenue for the half was $1.1 billion, down seven per cent on the previous first half.

Mr Hywood said while some parts of Fairfax were "battling hard" there was early progress in the broadcasting division, which achieved a seven per cent increase in underlying revenue.

But earnings for the key metropolitan media business, which includes the Sydney Morning Herald and Age newspapers, fell 36 per cent to $47.8 million.

Earnings for the group's regional newspapers, which Fairfax has previously hailed as a resilient business, fell 15 per cent to $75.5 million.

Morningstar analyst Tim Montague-Jones said the surprise hit to regional was likely to be the result of falling mining sector employment, while the week real estate market was affecting the entire business.

Metropolitan newspaper circulation fell but circulation revenue was up due to increased cover prices and more targeted distribution.

Mr Hywood said print media remained profitable.

Digital revenue now makes up 14 per cent of Fairfax group revenue, driven by the Stayz holiday booking and Domain real estate businesses.

Of concern were the Drive and My Career car and job classifieds businesses, which continued to lose revenue.

Mr Hywood said the businesses were "a long way behind the market leaders" and would be looked at as part of the company restructuring.

Fairfax reduced its staff numbers by 10 per cent during the half-year period and has so far cut 854 of the 1,900 jobs targeted under its restructure program.

Mr Hywood said the restructure was now expected to deliver savings of $251 million, up from $235 million originally projected, and said he would give details of further planned structural changes and cost savings during the year.

Fairfax has reduced its debt to $197 million, down from $914 million six months earlier.

The company declared a fully franked dividend of one cent, down from two cents in the previous first half.

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